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What does the federal budget mean for real estate in Australia?

The federal budget has been in the news for about a week now and there’s little else anyone can talk about. There has been speculation about what the policies will mean for various sectors, with every expert eager to lend their opinion to the ever-growing fray.

Real estate in Australia is particularly involved in this discussion as our national housing supply and the state of our economy are intricately linked to the success of the property sector.

What did the budget bring for property?

The biggest windfalls for real estate in Sydney and the rest of the country is the fact that taxes relating to investment properties remain unchanged. The Real Estate Institute of Australia (REIA) applauded the government on its forward-thinking move.

“The government is to be commended for ensuring stability within the sector in continuing the current tax arrangements as they relate to both capital gains tax and negative gearing,” said Amanda Lynch, CEO of the REIA, in a 12 May statement.

She went on to say that with other sectors of the economy showing signs of slowing down, the federal concern for efficacy of the property sector is appropriate – especially as these tax arrangements have been proven to benefit and stimulate investment in real estate in Australia.

“Abolition of negative gearing would result in a dwindling supply of properties for rent, escalating rents and reduced opportunities for low to middle income earning Australians to create wealth for self-funded retirement,” noted Ms Lynch.

On the other hand, the effects of the budget on small business have also made it into real estate headlines, especially with so many contractors and SMEs involved in the supply of housing and real estate services.

Graham Wolfe, chief executive of industry policy and media relations for the Housing Industry Association (HIA), said the $5.5billion federal package for small business and jobs is set to fire up the residential construction industry, and sectors related to the supply of new housing.

“The combination of a small business company tax cut of 1.5 per cent, a five per cent cut to unincorporated small business profits up to $1,000 per year, and the accelerated depreciation allowance on all new assets up to $20,000 provides a positive impetus for the Australian economy,” said Mr Wolfe.

Another area that greatly affects the efficacy of the property sector is the supply of reliable data, especially from the Australian Bureau of Statistics (ABS), which provides information on dwelling approvals, new home sales, build commencements and more.

Mr Wolfe notes that a further $235million of funding for ABS over the next five years will serve to enhance the Bureau’s effectiveness in collecting and reporting data, especially given some problems in data reliability in recent times.

The response from the opposition

It is the right and responsibility of the government’s opposition to offer up counter-arguments to the decisions made and enacted by the incumbent power, and in his budget reply speech on 14 May, Bill Shorten did just that.

All politics aside, it’s interesting to see that Mr Shorten also proposes a focus on property and construction in Australia, particularly the role of infrastructure in opening up and developing our communities. As we all know, federal and state spending on public works can often increase the amenities available to rental properties and owner-occupier housing. This can spur on housing values in areas that were previously underdeveloped, helping everyday Australians to grow their wealth and asset base.

With an incredible amount of data and projections to sort through, we haven’t heard the last on the budget for a while yet. Make sure to keep your ear to the ground for discussion of policy and how it could affect houses for sale and taxes as they apply to you.